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Thursday, 22 March, 2001, 08:19 GMT
Talking up Japan's economy
Bank of Japan
Bank of Japan still attempting to bolster economy
The Bank of Japan Governor wants to reverse its policy of zero interest rates announced on Monday as soon as consumer prices stabilise.

Governor Masaru Hayami said on Thursday he wanted to switch the central bank's policy back to targeting the inflation rate, but that it was too early to set a level now.

In order to prevent Japan falling into recession, the Bank of Japan said on Monday it would add enough money to the economy to prevent any banks going out of business.

But the change could take longer than he might think after a raft of bank news and earlier falls on the Dow Jones index hit the Nikkei stock market in the afternoon which closed at 12,853 down 250 points, or 1.91%.

The data showed companies slashing their spending plans and reports that Japan's top 16 banks will book a total of 4 trillion yen ($32bn) in bad loans for the fiscal year ending in March, up 60% on forecasts.

"Responding favourably"

Mr Hayami said he was keeping a close eye on financial markets after the central bank's monetary policy easing steps and that stocks were responding favourably.

"Stocks have been reacting favourably and long-term interest rates have fallen sharply," Mr Hayami told a news conference.

Bank of Japan Governor Masaru Hayami
Hayami wants to reverse Monday's policy U-turn as soon as possible
He said he hoped that real economic conditions would improve after the BOJ pumped liquidity into the financial markets in its credit easing announced on Monday.

The Bank of Japan scrapped it traditional interest rate targeting on Monday and invested heavily in the markets on Wednesday.

"We would like to switch (back) to interest rate targeting as soon as possible, when prices have stabilised," Hayami told a committee in the Japanese parliament's Upper House.

Meanwhile there were reports that the Japanese government is considering setting up an independent body to examine restructuring plans drawn up by non-financial firms in order to secure bad-debt cancellations from banks.

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See also:

19 Mar 01 | Business
Japan cuts rates to zero
16 Mar 01 | Business
Japan admits economy has stalled
21 Mar 01 | Business
US leads fresh share falls
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